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Inflation, a new old problem for business

AMERICA’S ANNUAL inflation rate reached 5% in May, the highest since August 2008. Companies as well as consumers are having to cope with this long-forgotten problem. Supply chains are clogged, input prices are climbing and demand is surging, as people unload pandemic-year savings and stimulus cheques. Firms are passing on price rises and raising pay. (British workers, too, are benefiting from boosted bargaining power.) With vacancies hard to fill some companies are seeking to save labour costs through automation or shifting production abroad. Investors and bosses worry that China, once a global deflationary force, is starting to export inflation. Factory-gate prices there leapt by 9% in the year to May.

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On our cover this week we examine bottlenecks in a specific, essential supply chain. Shortages of metals, land and finance threaten to constrain the boom in investment in green energy, as fossil-fuel giants switch priorities and clean-energy pioneers crank up. We estimate that the price of a basket of five minerals used in electric cars and grids has jumped by 139% in the past year. Yet the green transition has barely begun: by 2030 production of electric vehicles must be ten times what it was last year if the world is to stay on track for net zero. Governments are making things worse, by distorting climate policy for other aims. They can help by easing planning restrictions and helping investors and companies deal with risk—not least by introducing carbon prices, to give clear market signals.


This week Joe Biden made his first trip abroad as America’s president, to the G7 summit in Cornwall, in south-west England. From there he heads to Brussels for a meeting of NATO’s leaders and a US-EU summit. The alliance’s difficulties have not dissipated with Donald Trump’s departure. It needs to update its strategic outlook to embrace climate change, technological threats and the rise of China. And it is still unclear whether the transatlantic rift under Mr Trump will endure. Mr Biden’s trip culminates in a summit with his Russian counterpart, Vladimir Putin, in Geneva. The tour should allow him to form a common front before meeting Mr Putin, who this week banned groups linked to his main domestic opponent, Alexei Navalny. Yet the American president cannot please all his friends at once.


Mr Biden and his G7 host, Boris Johnson, have promised to provide hundreds of millions of covid-19 vaccines to poor countries. Such pledges sound generous. In fact they are miserly. The international inoculation effort is billions of jabs short. Failing to finance it properly is economically foolish, too: a rough calculation suggests that the world is passing up a four-year return of 17,900%. In India, where deaths seemingly far exceed the official toll, a change in policy should now speed up vaccinations. A study from a town in Brazil where almost everyone has been jabbed shows what might have been, had the country been more wisely led. Around the world, governments are proffering all sorts of incentives for inoculation, from cows (in the Philippines) to eggs, education and cold, hard cash.


Alzheimer’s disease, which accounts for 60-80% of cases of dementia, afflicts 50m people worldwide, a number likely to treble by mid-century. Hence the euphoria that greeted the approval, on June 7th, by America’s Food and Drug Administration of a treatment for Alzheimer’s for the first time since 2003. But the adulation for aducanumab is premature. The drug reduces the amount of beta-amyloid in the brain—but it is not yet known whether this protein is a symptom of Alzheimer’s or a prime cause. The FDA’s nod for this expensive treatment will be costly for health systems, and may divert resources from more promising lines of research.

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